On January 13, 2020, CCI issued its prima facie order directing the DG to conduct a detailed investigation against Flipkart Internet Services Private Limited (‘Flipkart’) and Amazon Seller Services Private Limited (‘Amazon’), and their affiliated entities (collectively, the ‘Opposite Parties’). [1]

The Delhi Vyapar Mahasangh (‘DVM’ / ‘Informant’) alleged that Flipkart and Amazon had entered into various vertical anti-competitive agreements and had jointly abused their respective dominant positions. It was also alleged that the Opposite Parties had entered into various exclusive vertical anti-competitive agreements with certain ‘preferred’ sellers on their marketplaces for the sale of various products. This was seen across sectors, including the smartphone market, where the Opposite Parties were the platform for the exclusive launch of several smartphone models. It was further alleged that the Opposite Parties were capable of influencing price and foreclosing competition by providing deep discounts and preferential listing to such identified preferred sellers on their respective marketplaces. Lastly, it was alleged by the Informant that the Opposite Parties were able to fund such discounts for the preferred sellers on account of the funding received from various investors which resulted in high entry barriers and high capital costs for any new entrants in the market.

At the outset, CCI clarified that the contentions of the Informant regarding joint abuse of dominant position by the Opposite Parties were untenable, since allegations of abuse by joint dominance were beyond the legal framework of Section 4 of the Act.

CCI, while assessing the allegation of market power, noted that the Opposite Parties comprised the bulk of the online retail market in India and for certain categories of products, such as smartphones, constituted a pre-dominant channel of distribution. CCI assessed the evidence on record and was of the opinion that there appeared to be exclusive agreements between the Opposite Parties and smartphone manufacturers for the exclusive launch of certain mobile phones. CCI further observed that these exclusive partnerships, coupled with the preferential treatment to a few sellers and such deep discounting practices to such preferred sellers, could result in an appreciable adverse effect on competition (‘AAEC’). CCI also noted that such preferred sellers which offered deep discounts were linked with the Opposite Parties on account of common investors, directors, shareholders, etc. Therefore, according to CCI, the role of funding of discounts by such Opposite Parties to their preferred sellers coupled with exclusive agreements merited investigation.

Accordingly, CCI ordered for an investigation to ascertain whether the alleged exclusive arrangements, deep-discounting and preferential listing by the Opposite Parties were used as an exclusionary tactic to foreclose competition in violation of Section 3(1) read with Section 3(4) of the Act. Amazon subsequently filed a writ petition challenging CCI’s order before the Karnataka High Court (‘Karnataka HC’), reportedly alleging lack of jurisdiction and CCI’s order having been passed “without prima facie application of mind”.[2] On February 14, 2020, it was reported that the Karnataka HC issued an interim stay on the order passed by CCI.

[1] Case No. 40 of 2019, Order dated January 13, 2020. [2] This article is available at: https://tech.economictimes.indiatimes.com/news/internet/karnataka-high-court-grants-stay-on-ccis-probe-for-eight-weeks/74136975.